Employment Laws in Mexico

Mexico is one of the famous countries with complex employment laws. Employment laws in Mexico are, thus, a guideline that employers must understand before hiring them. Employer-of-record services, including payroll, tax calculations, benefits, labor laws, etc, are essential measures employers know in advance.

In this blog, we will discuss the employment laws in Mexico in detail.

Under which measures are the employment laws in Mexico different from labor laws?

Employment laws and labor laws are not similar in Mexico. While the first one showcases the relationship between employer and employee, it emphasizes compensation, benefits, and other rules regarding the employment of the employees.

The labor laws in Mexico deal with the relationship between employers and Mexican unions.

The employment laws are regulated by the Federal Labor Law(FLL) and relevant state law. The law further focuses on keeping contract-based employer-employee agreements. On the other hand, the labor laws are based on the Collective Bargaining Agreement (CBA), which emphasizes collective rights and collective bargaining.

While individual lawsuits enforce the employment laws, the labor laws are enforced by unions, labor authorities, and labor courts. Though both terms have their own impact on the job world in Mexico, each term is weighed differently during the employment of employees.

Employment laws in Mexico – detailed discussions

Mexico’s employment laws provide comprehensive worker protections and are distinct from their labor laws, which govern unionized workforces. Here’s a detailed look at key aspects of Mexican employment law:

Mexico payroll laws details – wage, bonus, and other benefits of employees

Under Mexico payroll laws’ details, there are wages, bonuses, minimum and maximum wages, payroll cycles, etc – all covered.

General wage

The concept of a “general wage” in Mexico is a bit complex due to the variations in minimum wage and actual salaries across different factors. Here’s a breakdown to help you understand:

Minimum wage

• Varies based on location and type of work: There are two main categories:
• General minimum wage: Currently at 207.44 pesos per workday (approximately USD 10.40).
• Not necessarily representative of the average wage: Many occupations earn significantly more than the minimum wage.

Average salary

• Depends on various factors: Industry, experience, education, location, company size, etc.
• Recent estimates:
  1. The median monthly salary is approximately 29,200 MXN (approximately USD 1,695).
  2. The average annual salary is estimated at 399,000 MXN (approximately USD 23,154).
  3. Cost of living varies across Mexico: Adjusting for cost of living, Mexican salaries may be comparable to some lower-income countries.

Payroll cycle

According to Mexico payroll laws, the payroll cycle is followed by-weekly. Employees receive their salary on the 15th and last day of the month.

Working hours in Mexico

In Mexico, the concept of “minimum working hours” isn’t straightforward due to different types of work schedules and legal aspects. Here’s a breakdown to clarify

Work shift

Day shift: The day shift starts at 6 am and continues up to 8 pm.
Night shift: Evening 8 pm, it starts and continues up to 6 am.
Swing or mixed shift: This shift lasts seven-and-a-half hours, with at least three-and-a-half of those hours occurring during the night shift schedule.

Standard work week

• 48 hours total: This is the legal maximum for a standard work week.
• Divided into: Typically 6 days of 8 hours each, though schedules can vary with employer approval.

Minimum daily hours

• No legal minimum: There’s no specific minimum number of hours an employer must guarantee an employee per day or week.

Overtime

• Double pay: Any hours worked beyond the 48-hour maximum must be compensated at double the regular rate.

Part-time and temporary work

• No minimum hours: For part-time and temporary work, specific hours can be agreed upon in the contract, with no legal minimum set.

Exceptions and considerations

• Night shifts: Have shorter maximum durations (7 hours per day and 42 hours per week) due to potential health and safety concerns.
• Mixed shifts: Combining day and night work has a slightly longer maximum (7.5 hours per day and 45 hours per week).

Points to be remembered

• Flexible arrangements: While no minimum hours are mandated, employers and employees can agree on customized schedules.
• Overtime protection: Overtime pay ensures fair compensation for exceeding standard working hours.
• Contractual agreements: Always refer to the employment contract for specific hours and arrangements established between employer and employee.

Types of leaves in Mexico

As per employment laws in Mexico, employees are entitled to several types of leave to ensure rest, manage personal needs, and fulfill essential family responsibilities. Here’s a breakdown of the key types:

Paid leaves

• Annual leave: All employees are entitled to 10 days of paid vacation leave per year, accrued proportionally throughout the year.
• Sick leave: 7 days of paid sick leave can be used per year, with an additional 6 days without pay. Doctors’ notes may be required for extended absences.
• Maternity leave: 6 months of paid leave are provided to mothers before and after childbirth.
• Paternity leave: 5 days of paid leave are granted to fathers upon the birth of their child.
• Wedding leave: Up to 5 days of paid leave can be taken for the employee’s marriage.
• Bereavement leave: 3 days of paid leave are allowed for the death of a close family member.

Unpaid leaves

• Educational leave: Employees can request unpaid leave to pursue further education, with employer approval and specific conditions.
• Personal leave: Unpaid leave can be granted for unforeseen circumstances or personal reasons upon employer approval.

Additional leaves

• Breastfeeding breaks: Mothers with newborns are entitled to two 30-minute breastfeeding breaks per workday.
• Prenatal checkups: Pregnant employees can attend prenatal checkups during working hours without loss of pay.

Benefits for employees in Mexico

When it comes to benefits in Mexico, there’s a combination of mandatory and optional benefits enjoyed by employees. Here’s a breakdown of the key ones as per Mexico labor laws

Mandatory benefits

• Social security: Paid for by employers and provides access to healthcare, maternity/paternity leave, retirement pensions, disability benefits, and more.
• Housing fund (INFONAVIT): Employers contribute to this fund, allowing employees to access loans for purchasing or building homes.
• Christmas bonus (Aguinaldo): Equivalent to one month’s salary, paid to all employees in December.
• Profit sharing (Reparto de Utilidades): A share of the company’s profits distributed to employees under certain conditions.
• Vacation leave: 10 days of paid annual leave, accruing proportionally throughout the year.

Optional benefits

• Private health insurance: Many employers offer additional health insurance plans beyond the basic coverage provided by Social Security.
• Life insurance: Some companies offer life insurance policies to their employees.
• Retirement savings plans: These voluntary plans allow employees to save for retirement beyond the social security system.
• Food vouchers: Companies can provide vouchers for groceries and meals, often with tax benefits.
• Transportation reimbursement: Some companies offer financial assistance for employee transportation.
• Educational assistance: Certain companies might offer financial support for employee education and development.
• Gym memberships: Some employers provide subsidized gym memberships or on-site fitness facilities.

Additional points

• Benefits vary by company size and industry: Larger companies and those in certain industries tend to offer more comprehensive benefits packages.
• Negotiation can be possible: While some benefits are mandatory, employees may be able to negotiate additional perks or improvements to existing benefits.
• Benefits impact employee satisfaction and retention: Offering competitive benefits can attract and retain talent.

Probation and notice periods in Mexico

According to the employment laws in Mexico, probation, notice, and termination policies are different.

Probation period

As per Mexico labor laws, the probation period for new hires is regulated by the Federal Labor Law (FLL) and can vary depending on the type of position and its duration. As per the labor laws in Mexico, 30 days is the minimum probation period in Mexico. But in some employment cases, it lasts up to 180 days.

Notice period

In Mexico, notice periods for employee resignation and employer termination differ, each with its own rules and regulations. Here’s a breakdown to help you understand

Employee resignation

• No legal obligation: As per the Federal Labor Law (FLL), employees are not legally bound to provide any notice period before resigning. They can typically leave the company immediately or give reasonable notice based on professional courtesy or contractual agreements.
• Exceptions: Certain contracts might stipulate a specific notice period, especially for high-ranking positions or those involving confidential information.
• Professional courtesy: While not mandatory, giving reasonable notice (e.g., two weeks) shows professionalism and allows for a smooth handover of responsibilities.

Employer termination

• Termination with cause: If an employer fires an employee for justifiable reasons (e.g., misconduct, poor performance, violating company policies), there’s no legal requirement to provide notice. However, written notification of the reason for termination is still necessary.
• Termination without cause: If an employee is terminated without justifications, the employer must provide a notice period or severance pay:
• Notice period: One month’s notice before the termination date must be given.
• Severance pay: If notice is not provided, the employer must pay separation pay (indemnización) equivalent to one month’s salary for every year of service (capped at 12 months).

Tax calculations in Mexico

According to payroll laws in Mexico, the tax system depends on various factors. Here is the breakdown of the tax in Mexico

Income tax

• Progressive system: Tax rates increase with increasing income.
• Five brackets: Currently, the brackets range from 1.92% to 35% (as of 2023).
• Taxable income: Includes wages, salaries, bonuses, interest income, rental income, and capital gains.
• Withholding: Employers automatically withhold income tax based on salary and tax brackets.
• Annual tax return: Individuals are responsible for filing annual tax returns to calculate their total tax liability and claim any deductions or credits.

Social security contributions

• Mandatory contributions: Paid by both employees and employers to fund social security benefits like healthcare, retirement pensions, and disability insurance.
• Contribution rate: Varies based on the employee’s salary and type of social security scheme (IMSS or SITE).
• Deducted from salary: The employer automatically deducts the employee’s contribution from salary and remits it along with the employer’s contribution to the relevant social security institution.

Other taxes

• Value Added Tax (VAT): A 16% tax is applied to most goods and services.
• Additional taxes: Some specific products and services may have additional taxes.

Exceptional scenarios in Mexico

There are some exceptional cases under the employment laws in Mexico. As labor laws in Mexico come under Federal Labor Laws (FLL), a few rules are different from other countries. Here is the list of cases that are hardly found in other countries

• In general, employers do not have the right to terminate employees without viable reasons
• Employees must get severance pay if they get terminated for reasons
• Termination without reasons must be addressed with the highest severance pay
• An employee can resign anytime without serving a notice period
• Employees receive the 13th month salary as a Christmas bonus

Mexico labor laws are different from other countries and you need to understand the common differences. You need to understand the employer of record services, including compliance, Mexico payroll laws, onboarding rules, etc, before hiring Mexican employees for your organization.

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Bottomline

Employment laws in Mexico are complex and associated with many factors. Some exceptional laws are only found in Mexico due to its strict labor policies and unionized culture. You can sign up with Global Squirrels and bypass all the complexities of Mexico labor laws.